Oil refinery in Carson is shown in this 2006 file photo. California's cap-and-trade emissions program has hit its six-month mark. NICK UT, THE ASSOCIATED PRESS

When he saw the numbers from Friday’s auction, Dave Clegern and his colleagues at California’s Air Resources Board heaved a collective sigh of relief.

“We were just glad the program’s working like it’s supposed to,” Clegern said.

Friday marked the fourth auction of greenhouse gas credits since the state’s much-debated “cap-and-trade” initiative was launched in January. Green groups like the Environmental Defense Fund are saying the results – in which the rights to emit more than 14 million tons of carbon dioxide were sold – show that the system is succeeding.

“For the first time this quarter, all the credits being stored were sold off,” said Tim O’Connor, who leads EDF’s climate and energy efforts in California. “And 70 percent more were bid on... . It’s a statement of people believing that this program is here to stay.”

In the latest auction, the Air Board’s current credits – valued at $170 million – were sold out. Businesses, cities and other participants with these credits can start emitting immediately. Additionally, more than $100 million in future emission credits were sold this quarter, beating out last quarter’s sales by roughly $20 million.

About 350 businesses and cities took part.

The program’s first auction was held in November, though the program itself did not officially start until January. It’s designed to drive down carbon emissions by requiring participants to buy credits if they emit over 25,000 tons of carbon dioxide per year, or the equivalent weight of other greenhouse gases.

The participants are assigned a certain number of greenhouse-gas credits based on production levels: Energy-efficient participants end up getting surplus shares, while less-efficient companies have to buy surplus shares from the efficient companies, or directly from the Air Resources Board.

Between 2013 and 2020, the number of greenhouse gas credits offered will decrease by 2-3 percent per year, driving up their price. As participants in the program have to pay more for the carbon they emit, the Air Resources Board says, they will be forced to find ways to increase their efficiency to remain profitable.

The program has faced opposition from the California Chamber of Commerce, which filed a lawsuit against it before the first auction. Loren Kaye, an attorney for the chamber involved in the litigation, said that while he was “impressed” by the program’s overall goal to limit carbon emissions, he thinks the money generated by cap-and-trade is being mismanaged by the state.

“In fact, the lawsuit is not even against cap-and-trade,” Kaye said. “It's against the regulation that allows the Air Resources Board to auction the emissions allowances and retain the money for itself.”

The chamber’s position, Kaye says, is that the emission credits should be distributed free of charge and gradually limited in number, rather than having participants pay the state for extras. Carbon markets operate all over the world, Kaye noted, and many don’t have built-in mechanisms that raise revenue for the government.

He compared cap-and-trade with EPA’s Acid Rain Program, which he says is widely considered a success. The major difference between the two programs: The government profits from cap-and-trade, but not from Acid Rain.

“We know this would work, even without the auction,” Kaye said. “This isn’t some brand-new experiment.”

Clegern said while it is true that the state profits from sales of carbon shares, the money collected is under tight control.

The first of these pots is designed to offset cost increases – in electricity, gas and other utilities – caused by cap-and-trade. If utility fees go up, the money will come back to taxpayers as a partial refund on their bills.

The second pot is for constructing things that reduce carbon emissions, like mass transit, renewable energy plants and green buildings.

“The ‘offset pot’ gets the lion’s share of the profits,” Clegern said. “That’s the bigger priority, making sure that small businesses and families aren’t casualties in our efforts to make California a more efficient state.”

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